Canary Wharf (BP4) T1 Ltd v European Medicines Agency
Jurisdiction | England & Wales |
Judge | Mr Justice Marcus Smith |
Judgment Date | 20 February 2019 |
Neutral Citation | [2019] EWHC 335 (Ch) |
Docket Number | Claim No: PT-2018-000505 |
Court | Chancery Division |
Date | 20 February 2019 |
[2019] EWHC 335 (Ch)
THE HONOURABLE Mr Justice Marcus Smith
Claim No: PT-2018-000505
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
PROPERTY TRUSTS AND PROBATE LIST
Rolls Building
7 Rolls Building
Fetter Lane
London EC4A 1NL
Ms Joanne Wicks, QC, Lord Anderson of Ipswich, KBE, QC, Mr Jonathan Chew and Ms Zahra Al-Rikabi (instructed by Clifford Chance LLP) for the Claimants
Mr Jonathan Seitler, QC, Mr Thomas de la Mare, QC, Ms Emer Murphy and Mr James Segan (instructed by DLA Piper LLP) for the Defendant
Hearing dates: 16, 17, 18, 21, 22, 23, 24, 25 and 28 January 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
CONTENTS | ||
A. | INTRODUCTION | Paragraph 1 |
(1) | The background to these Proceedings | Paragraph 1 |
(2) | Issues between the parties | Paragraph 7 |
(3) | The event said to frustrate the Lease lies in the future | Paragraph 13 |
(4) | Structure of this Judgment | Paragraph 20 |
B. | THE ENGLISH DOCTRINE OF FRUSTRATION | Paragraph 21 |
(1) | Central propositions | Paragraph 21 |
(2) | The juridical basis for the doctrine of frustration | Paragraph 25 |
(3) | “It was not this that I promised to do” | Paragraph 28 |
(4) | A multi-factorial approach | Paragraph 39 |
(5) | Types of frustrating event | Paragraph 41 |
(6) | Self-induced frustration | Paragraph 43 |
C. | THE MATERIAL FACTS | Paragraph 47 |
(1) | The evidence before the court | Paragraph 47 |
(2) | The nature of the Property and the manner in which the Property and the Premises came to be procured | Paragraph 56 |
(3) | The nature of the EMA | Paragraph 62 |
(a) | Establishment | Paragraph 63 |
(b) | Personality | Paragraph 64 |
(c) | Capacity | Paragraph 66 |
(d) | An intra-Union function | Paragraph 68 |
(e) | Funding and expenditure | Paragraph 70 |
(f) | Liability of the EMA | Paragraph 77 |
(g) | Protocol 7 | Paragraph 79 |
(h) | Location of the EMA's headquarters | Paragraph 87 |
(4) | The provisions of the Lease | Paragraph 92 |
(5) | The EMA's attempts to dispose of the Premises | Paragraph 94 |
D. | ISSUES RELATING TO THE EMA'S LEGAL CAPACITY IN RELATION TO THE LEASE ARISING OUT OF THE FRUSTRATING GROUNDS AND THE EMA'S SELF-STANDING POINT | Paragraph 96 |
(1) | Introduction: the EMA's case | Paragraph 96 |
(2) | My approach to the EMA's case | Paragraph 101 |
(3) | Anterior questions | Paragraph 102 |
(a) | The applicable law | Paragraph 102 |
(i) | Does a question of private international law arise at all? | Paragraph 102 |
(ii) | Characterisation | Paragraph 108 |
(iii) | Applicable law | Paragraph 110 |
(b) | A preliminary reference? | Paragraph 113 |
(c) | Capacity and vires in European Union law | Paragraph 126 |
(4) | Issues regarding the EMA's legal capacity to act in relation to the Lease | Paragraph 130 |
(a) | Introduction | Paragraph 130 |
(b) | Scenario 1 | Paragraph 132 |
(i) | Effect on the EMA's Protocol 7 protections | Paragraph 132 |
(ii) | Potential loss of the EMA's protection under Article 72 of the 2004 Regulation | Paragraph 136 |
(iii) | Capacity to hold or deal with immovable property outside the territory of the European Union | Paragraph 140 |
(iv) | Capacity of the European Union to designate the EMA's headquarters outside the territory of the Member States of the European Union | Paragraph 146 |
Introduction | Paragraph 146 | |
A rule of public international law | Paragraph 149 | |
A rule of European Union law | Paragraph 156 | |
(v) | The obligation to pay rent | Paragraph 159 |
(vi) | Summary of conclusions | Paragraph 160 |
(c) | Scenario 3 | Paragraph 161 |
E. | FRUSTRATION OF THE LEASE IN THE CASE OF SCENARIO 1 | Paragraph 166 |
(1) | Introduction | Paragraph 166 |
(2) | Frustration by supervening illegality | Paragraph 169 |
(a) | Approach | Paragraph 169 |
(b) | Supervening illegality in the cases | Paragraph 173 |
(c) | The significance of the relevantly applicable law | Paragraph 177 |
(i) | Introduction | Paragraph 177 |
(ii) | Capacity conferred by English law | Paragraph 182 |
(iii) | Applicable law to the question of frustration and the English law approach to supervening illegality under the law of a different law district | Paragraph 186 |
(d) | Capable of frustrating the lease? | Paragraph 190 |
(i) | Paragraph 190 | |
(ii) | The present case | Paragraph 196 |
(iii) | Self-induced frustration | Paragraph 201 |
(e) | Conclusions | Paragraph 208 |
(3) | Frustration of common purpose | Paragraph 209 |
(a) | Approach | Paragraph 209 |
(b) | Matters relevant to the parties' expectations on 5 August 2011 | Paragraph 211 |
(i) | Foreseeability of the United Kingdom's withdrawal from the European Union | Paragraph 211 |
Introduction | Paragraph 211 | |
Foreseeability | Paragraph 215 | |
(ii) | The “bespoke” nature of the Property and the Premises | Paragraph 217 |
(iii) | Protocol 7 | Paragraph 221 |
(iv) | The length of term and the absence of a break clause | Paragraph 223 |
(v) | Insurance | Paragraph 227 |
(vi) | The Allen & Overy letter | Paragraph 229 |
(vii) | The EMA's budgetary process and the scrutiny of the financial implications of the Agreements (including the Annex 15 Draft Lease) | Paragraph 231 |
(c) | Nature of the supervening event | Paragraph 234 |
(d) | “Radically different” | Paragraph 235 |
(i) | Application of the test | Paragraph 235 |
(ii) | The Lease | Paragraph 239 |
(iii) | Was there a common purpose in this case? | Paragraph 244 |
(iv) | Relative justice | Paragraph 249 |
F. | FRUSTRATION OF THE LEASE IN THE CASE OF SCENARIO 3 | Paragraph 251 |
G. | THE EMA'S SELF-STANDING POINT | Paragraph 254 |
H. | CONCLUSIONS AND DISPOSITION | Paragraph 252 |
A. INTRODUCTION
(1) The background to these Proceedings
. The European Medicines Agency (the “EMA” 1) is an agency of the European Union. It holds an underlease dated 21 October 2014 (the “Lease”) of part of 25–30 Churchill Place, Canary Wharf (the “Property”) for a term of 25 years (the “Term”). The Claimants – collectively “CW” – are the landlords of the Lease and the management company for the Canary Wharf estate. It is unnecessary to differentiate between the Claimants for the purposes of this judgment. I shall refer to the property leased to the EMA pursuant to the Lease as the “Premises”.
. By a letter dated 2 August 2017, the EMA wrote to CW stating that:
“Having considered the position under English law, we have decided to inform you that if and when Brexit occurs, we will be treating that event as a frustration of the Lease.”
. These proceedings (the “Proceedings”) were commenced because CW took the view that the commercial uncertainty created for CW and their lenders by this contention required early resolution. For its part, the EMA did not dissent from the importance of an early resolution of the Proceedings. By an order dated 2 August 2018, Mann J ordered that – so far as practicable – these proceedings should be heard, and preferably judgment delivered, by 29 March 2019.
. The Proceedings were commenced under CPR Part 8. The relevant part of the CPR Part 8 Claim Form states that CW are seeking:
“…a declaration that the withdrawal of the United Kingdom from the European Union and/or the relocation of the [EMA] (whether inside or outside of the United Kingdom) will not cause [the Lease] to be frustrated and that the [EMA] will continue to be bound by all of its covenants and obligations in the Lease and all related documents including (but not limited to) payment of the full rents under the Lease throughout the Term of the Lease unless released by law upon a lawful assignment of the Lease properly made in accordance with its terms…”
. It will be necessary to set out precisely why the EMA contends that the Lease will be frustrated. The reference to the relocation of the EMA in the Part 8 Claim Form is a reference to the EMA's contention that one consequence of the United Kingdom's withdrawal from the European Union is the need for the EMA to re-locate away from the United Kingdom, with the corollary that its (present) London headquarters would no longer be needed. The EMA's letter of 2 August 2017 put the point thus:
“It would be unprecedented and incongruous for an EU body such as the [EMA] to be located in the UK and continue to pursue its mission in London after the UK has left the EU. Such circumstances were simply not contemplatable at the time of entering into the Lease.”
. By his order of 2 August 2018, Mann J ordered that the EMA file and serve points of claim providing particulars of the EMA's case on frustration in response to CW's claim for a declaration. Such points of claim – together with a counterclaim for declarations of its own – were duly served by the EMA (the “Points of Claim”). 2 CW responded by way of “Points of Response”. 3
(2) Issues between the parties
. The EMA contends that the Lease is frustrated for the following reasons (which are relied upon by the EMA...
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